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ThePlumLIneGS whorunsgov plumline
Posted at 11:38 AM ET, 10/10/2011

Getting the economic policy right

The biggest political problem for the Barack Obama White House is failure of results, not failure of spin.

The Obama Administration made real mistakes in economic policy, but also got a lot of stuff right – and most importantly, the things it got wrong were the sorts of things that policy makers generally get wrong in responding to similar economic challenges. That’s the gist of Ezra Klein’s must-read review of Obama Administration economic policy – it’s a terrific, balanced, approach, and does an excellent job of integrating economic and political analysis.

See also Paul Krugman’s response, which takes a harsher line emphasizing the places where Obama and his economic and legislative team could have done better. My own feeling has been that the main thing could have been done legislatively would have been a long-term deficit-neutral fix to pro-cyclical state budget policy: in other words, something that would have allowed automatic federal aid to states during hard times conditioned on states repaying that help when revenues recovered. I can’t, of course, guarantee that such a scheme could have made it through Congress, but I suspect it would have, and if properly written it would have prevented most or all of the hundreds of thousands of government jobs lost over the last few years.

But I strongly disagree with Henry Blodget and others who believe that a different course of action would have produced better spin and thus saved Obama. Blodget argues:

Obama certainly could have given himself a better chance to get re-elected despite the horrible economy. If Obama had recognized how bad things were, asked for a much bigger stimulus than he ended up asking for, and, importantly, set the appropriate expectations, he’d probably have been able to pin the blame for the mess where it belongs: On the three decades of decisions that facilitated the debt build-up that eventually culminated in the financial crisis.

Instead, however, Obama over-promised and under-delivered. And this will make it that much harder for him to get re-elected.

I disagree with that on three grounds. First is that the spin could easily have run the other way: Obama might have looked weak and ineffectual by failing to get what he claimed to need from a (Democratic) Congress. Second, it’s not at all clear that there’s much more blame-shifting available to him; after all, as it is the polls indicate that people still (quite properly) blame George W. Bush for the economic calamity. The thing to change that would be economic growth, not clever spin.

But perhaps most importantly, I think in these sorts of second-guessing it’s important to keep in mind what went right, and not to assume that it was inevitable. As Scott Lemieux reminds us, the stimulus just barely squeaked through the Senate. It’s very possible that the alternative to what Obama got wasn’t a larger stimulus or better spin; the alternative might well have been a filibuster, no bill at all, no Arlen Specter flip, and consequently little legislative success over the remainder of the 111th Congress.

The bottom line is that economic results trump spin, and the job of the Obama Administration in 2009 was to get the policy right, and then assume that the spinmeisters would do their best with whatever results they were given. Bash the president as much as you like for getting the policy wrong if that’s what you think he did, but while it was important to design policies that could be implemented (and that includes the politics of getting them through Congress), the last thing Obama and his team should have had in mind in 2009 was constructing policy so that it could fit a good story down the line.

By  |  11:38 AM ET, 10/10/2011

 
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